Tenn. Beer Tax Reform Act makes its General Assembly debut

With all the campaign events, social media support and grassroots followers, there have been few stories in the past few months that have built up as much anticipation as the Tennessee Beer Tax Reform Act making its way to the Tennessee General Assembly. The statewide campaign to reform 1950s-era tax policy will reach its first legislative benchmark on Tuesday, March 12, in the General Assembly.

The turnout at Fix the Beer Tax campaign events has been incredible, according to Rich Foge, president of Tennessee Malt Beverage Association. He told Craft Brewing Business: “These 60- to 70-year-old laws affect the choices they have when they go to get beer at the store and how they pay.”

“Tennessee is at a tipping point,” said Rich Foge, president of the Tennessee Malt Beverage Association. “For the good of Tennessee’s competitive edge, and for the good of consumers, the Beer Tax Reform Act of 2013 will bring common-sense logic to this portion of the state’s tax code.”

The Beer Tax Reform Act of 2013, filed by Rep. Sexton (R-Crossville) and Sen. Kelsey (R-Germantown), proposes to convert Tennessee’s wholesale beer tax to a more business friendly, volume-based calculation. On March 12, the House Local Subcommittee and Senate State and Local Committee will vote on the proposed reform that aims to remove Tennessee’s reputation as the top beer taxer in the country.

Tennessee has the nation’s highest effective beer tax rate, 12 percent higher than No. 2, and it is rising higher every year, regardless of whether beer sales rise. This effect is the result, likely unintended, from beer-tax policy established by the State of Tennessee in 1954. Since that time, Tennessee has blown past every state to be the nation’s highest taxer of beer.

Said Rep. Sexton, “Our state’s wholesale beer tax needs to be reformed. Right now, the tax is working against Tennessee. The world has changed — Tennessee has changed — a great deal since the wholesale tax was established. The policy should be modernized to reflect changes in the market, such as the growth of craft brewers, to encourage rather than discourage economic investment.”

A look at the past trends can provide a glimpse into Tennessee’s future. In 2008, Tennessee surpassed Alaska as the top state taxer of beer. By 2012, Tennessee had increased that lead by 12 percentage points. If the state keeps rising at the current average annual price increase of $1.15, in five years the average tax rate will be $42.75 per barrel — 29 percent higher than Alaska. In 10 years it will be $48.50 — 46 percent higher. In 15 years, it will be $54.25 per barrel — 64 percent higher.

The statewide, grassroots Fix the Beer Tax Campaign launched Jan. 30 in Nashville and has rallied in Memphis, Knoxville, Johnson City and Chattanooga. So far, more than 2,000 people have written their local lawmakers in support of beer tax reform, and the flurry of passion promises to continue right up until Tuesday’s vote.